After a strong rebound through much of 2013, home sales are now stalling. Signed contracts to buy existing homes in December dropped a far larger-than-expected 8.7 percent month to month, and sales are down almost the same from December of 2012, according to the National Association of Realtors.
This is the lowest pace since October of 2011, after the expiration of the homebuyer tax credit.
"Unusually disruptive weather across large stretches of the country in December forced people indoors and prevented some buyers from looking at homes or making offers," said Lawrence Yun, chief economist for the Realtors in a release.
January has been no better so far, especially in the South, where sales are usually stronger in the winter, thanks to milder weather.
"I spent all morning helping people get unstuck in front of my house," said Ben Hirsh, a real estate agent in Atlanta; much of his staff has had to work from home this week, communicating through instant messages.
"We did have to reschedule several property inspections until next week. I can also see this delaying new inventory (which the neighborhood Buckhead desperately needs) by at least two weeks," said Hirsh. "I would not be surprised if the storm had as much as a 15-20 percent impact on closed sales for the month of January, since many closings are clustered at the end of the month and will be rescheduled to next week."
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While weather could delay closings, it won't extinguish them entirely, and that is why the Realtors are also blaming high prices for the slump.
"Home prices rising faster than income is also giving pause to some potential buyers, while at the same time a lack of inventory means insufficient choice," said Yun.
Prices are still rising fast, up nearly 14 percent in November, according to the latest S&P/Case-Shiller Home Price Index. Job and income growth are not even close, especially as more Americans move out of the workforce. Unemployment is at its lowest level in five years at 6.7 percent, but much of that is driven by fewer workers in the mix.
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"With median wage levels stagnant, many potential buyers do not have the resources necessary to participate in the homeownership market," wrote Fitch Ratings' Stefan Hilts, in a report released Thursday. "Without a strong employment base, it is difficult to find sustainable support for the rapid growth in home prices across much of the country."
Much of the home price growth in 2013 came from investors, not increased demand from owner-occupant buyers. First-time home buyers have been an unusually small part of the housing recovery, and move-up buyers are still hampered by negative equity and poor wage growth. Spring, however, historically the strongest season for housing, is right around the corner.
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"This week, D.R. Horton and Pulte Homes have spoken optimistically about the upcoming spring selling season, so hopefully we'll see a bounce back in buying," wrote Peter Boockvar, an analyst with The Lindsey Group. "But I look forward to seeing the makeup of the buyers. Do they plan to live in the home or rent it out?"